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The Work and Pensions Committee is urging the government to give higher Universal Credit to people just below state pension age as this rises to 67 by 2028, at a cost of £600m.
In a report published on Friday last week, the Work and Pensions Committee said the government should consult on higher Universal Credit for 66-year-olds, with a view to implementing it by the end of 2026 as a temporary measure while it develops longer-term support.
A proposal to create extra benefits for people just below state pension age was first made by the Institute for Fiscal Studies in late 2024, citing rising poverty rates among pre-pensioners. When the state pension age went up to 66 between 2018 and 2020, absolute income poverty among people in the year approaching it rose from 10% to 24%. In 2024-25, people aged 60 to 64 had the second highest rate of relative poverty after housing costs among adults (20%).
“We can’t just allow people who are already struggling as they approach pension age to be forced to choose between continuing work in poor health or prolonging their poverty as they wait for their state pension to kick in. This is not the later life that anyone wants or to see their loved ones endure after providing for decades,” said committee chair Debbie Abrahams.
She said pre-pensioners have greater needs and greater barriers to employment due to ill-health, age discrimination and a lack of opportunity to upskill.
“More than half of people are not in paid work in their mid-60s, and they’re not likely to get it if they’ve been effectively written off. Additional social security payments are essential in reducing the compounding effects of the lottery of life and the state pension age increase,” she argued.
The state pension age is due to rise to 67 until April 2028, before going up again to 68 between 2044 and 2046. A review of the state pension age is currently underway which could make further recommendations around age-related eligibility for the state pension.
There is now a big cliff-edge between welfare for those of working and pension age. The standard rate of Universal Credit is £425 a month; in comparison, pension credit provides more than twice that at £1,031 a month. It means people in poverty will likely be lifted out of it once they reach state pension age. Pensioners are currently the age group with the lowest poverty rates.
For the MPs on the committee, a sore point is the fact the most recent impact assessments for increases in the state pension age dates from 2013.
“The harm has already been done for some planning retirement if policymakers are using outdated impact assessments in making the changes they are. As a result, we know there will be an impact, but we don’t know how big it will be,” said Abrahams. “But it’s not too late; if the government takes action quickly, those who face poverty because they deplete their savings before reaching pension age can be helped.”
The committee said making extra payments through Universal Credit to 66-year-olds would cost £600m, comparing this to a potential saving of £10.5bn made from the increase in state pension age.
It is not clear if giving extra protections to one group of working-age people based on their age would be compatible with equality laws.
Welfare spending is rising
The outgoing prime minister, Sir Keir Starmer, attempted to curb the government's welfare bill last year but was defeated by his own party, contributing to his weakened position.
Social security benefits are the largest area of UK expenditure, increasing by £22.9bn, the latest Whole of Government Accounts show. The fast rise is driven mainly by pensioner benefits, due to population ageing and the government’s commitment to uprate state pensions by the highest of earnings, inflation or 2.5%. In 2024-25, state pensions accounted for 42% of the UK’s £334.3bn social security payments, amounting to £141.1bn. Adding pension credit, pensioner benefits reach 44%. Without changes, the cost of the state pension is set to rise to 9% of GDP by 2075-76, according to the Office for Budget Responsibility’s latest projections, up from currently 5%.
Should benefits be increased for people just below state pension age?
